A bill to provide for a demonstration program in which a limited number of States would be permitted to provide unemployment compensation to individuals for the purpose of funding self-employment.

Provides for a demonstration program in which a limited number of States would be permitted to provide unemployment compensation to individuals for the purpose of funding self-employment.

Directs the Secretary of Labor to enter into a program agreement with at least five, but not more than ten, States. Sets forth factors that the Secretary must consider in selecting States for such program.

Requires program agreements to provide that: (1) each eligible individual, for the three-year benefit period beginning on the date on which such agreement is entered into, shall be entitled to receive adjustment assistance in the form of self-employment allowances; and (2) an individual receiving such assistance shall not be eligible to receive, in addition to such assistance, extended or other additional compensation with respect to such benefit year if payment is made under this Act by the State in lieu of regular compensation.

Makes an individual an eligible individual with respect to any benefit year, for purposes of this Act, if such individual: (1) is eligible to receive regular compensation under the State law during such benefit year; (2) submits an application to the State agency for adjustment assistance under this Act; and (3) meets applicable State requirements. Limits the number of individuals who may be considered as eligible individuals for purposes of this Act during such year.

Provides that the aggregate amount of adjustment assistance provided under this Act in the form of a self-employment allowance to any individual with respect to any benefit year shall not exceed the maximum amount of regular compensation that a State makes available plus any extended or additional compensation payable to such individual with respect to such benefit year. Provides, for such purposes, that the maximum amount of extended or other additional compensation payable to any individual with respect to any benefit year shall be determined: (1) as of the day on which the individual submits an application for adjustment assistance under this Act, by assuming that the unemployment conditions in the state during the week in which such application is submitted will remain constant; and (2) without regard to any termination of a program under which payments of extended or other additional compensation are being made for the week in which such application is submitted.

Permits eligible individuals to file applications for self-employment allowances with State agencies responsible for administering agreements under this Act.

Allows a State to pay a self-employment allowance in one or more payments and to make the payment directly to, or on behalf of, an eligible individual.

Prohibits a State from offering such allowances unless it is implementing a program approved by the Secretary and designed to select and assist individuals for self-employment, monitor such employment, and provide for complete evaluation of the use of such allowances.

Provides that State and Federal requirements relating to availability for work, active search for work, or refusal to accept suitable work shall not apply to an individual receiving a self-employment allowance under this Act as long as such individual is self-employed.

Provides for payments to States of amounts equal to the Federal share of each payment (other than administrative expenses) made by the State agency on account of adjustment assistance provided to an individual under this Act. Requires that such Federal share be paid from amounts available for payment of the Federal share of extended or supplemental compensation and from any amounts appropriated to carry out this Act. Makes such Federal share equal to the percentage of the extended or other additional compensation taken into account for purposes of this Act for which the State would have been entitled to reimbursement if such additional compensation had been paid under the Federal-State Extended Unemployment Compensation Act of 1970, the Federal Supplemental Compensation Act of 1982, and any other Federal law providing additional compensation.

Permits States to make payments (exclusive of administrative expenses) from State unemployment funds for adjustment assistance provided under this Act. Provides, for purposes of Social Security Act provisions relating to grants for administrative expenses, that the provisions of this Act shall be treated as unemployment compensation law.

Directs the Secretary to submit to the Congress: (1) within two years after enactment of this Act, an interim report on the effectiveness of such demonstration program; and (2) within four years after such enactment, a final report on such program.

Sets forth provisions relating to fraud and overpayments.

Excludes activities taken by a State pursuant to an agreement under this Act from being taken into consideration in determining whether there has been a net decrease in the solvency of the State unemployment compensation program.

Defines "extended or additional compensation," for purposes of this Act, as: (1) extended compensation; (2) Federal supplemental compensation payable under the Federal Supplemental Compensation Act of 1982; and (3) any other compensation payable to exhaustees by reason of conditions of high unemployment. Gives certain other terms under this Act the same meanings as under the Federal-State Extended Unemployment Compensation Act of 1970.

Makes this Act effective on October 1 of the first fiscal year beginning after its enactment date.